Articles

Browse Articles » Business » Setting Up Business in India

Setting Up Business in India

by EzyBiz India Tax & Accounting Consulting Firm

SETTING UP BUSINESS IN INDIA

FOREIGN COMPANY INCORPORATION IN INDIA

SUBSIDIARY COMPANY REGISTRATION IN INDIA

First thing which comes to anybody’s mind is why set up business in India? Well, presently, India is one of the fastest growing economies of the world.

Every year, more and more foreign companies are setting up business in India. Also, it is an attractive foreign investment destination in the world due to following factors:

a) Vast range of industries,

b) Availability of skilled and unskilled manpower,

c) Huge middle class consumer base,

d) Second highest English speaking population,

e) Ease of doing business and

f) Government initiative for attracting foreign investment and adoption of best practices in production of goods and services.

Let’s deep dive more and explore some more facts about India.

Facts about India

1) It is world’s largest democracy

2) It is highly populated, only next to China with 1.38 Billion People

3) It is second largest English speaking country in world.

4) It has huge market in terms of huge middle class consumer base of 500 million people with good purchasing power

5) Fourth largest automobile industry in world and by 2026, it will be in no. 3 position

6) Second largest telecommunication market in world with subscriber base of 1.18 Billion

7) World’s largest offshoring destination for IT companies across the globe. Estimated revenue from ITES AND BPO was USD 135 Billion

8) Total FDI in FY 2018-19 was approx. USD 45 Billion. Major countries are Japan, Singapore and Mauritius.

9) World’s 5^th Largest global destination in RETAIL space

10) Majority of the Fortune 500 companies have R&D centre and or assembly line in India

All the aforesaid factors have contributed to attracting foreign investment and leading to more and more foreign company incorporation in India.

Options available for Foreign Companies/Foreign Citizens to set up business in India

Foreign companies have following options to set up business in India, namely

a) Wholly Owned Subsidiary Company

b) Joint Ventures

c) Limited Liability Partnerships

d) Branch/Liaison/Project Office

Out of above, Subsidiary Company Registration in India is most popular and tax efficient option.

CORPORTAE TAX RATES ON ENTITY

a) PRIVATE LIMITED COMPANY/ WOS- Company is liable to tax on global income at different tax rates like 15%, 22%, 25% and 30% depending upon case to case. Also, Subject to MAT @ 15% of book profits.

b) LIMITED LIABILITY PARTNERSHIPS- LLPs are liable to tax on global income @30%. Further, LLPs are liable for alternate minimum tax @18.5% on its book profits.

c) BRANCH OFFICE and PROJECT OFFICE - Tax rate applicable on income earned in India @ 40% plus surcharge and education cess

d) LIAISON OFFICE- Since they cannot do any business. No Taxes applicable

PROCEDURE FOR OPENING PRIVATE LIMITED COMPANY OR WOS IN INDIA

1) Minimum 2 Directors and 2 shareholders required

2) Atleast 1 Director shall be Indian Resident

3) Shareholders can be Company or Individual

4) First of all Digital Signature of all Directors are prepared

5) Second step is for applying name approval from Registrar of Companies [ROC]

6) Third step is drafting of Memorandum and Article of Association and Director Identification number and other documents and applying for incorporation

7) Finally, Certificate of Incorporation [ COI] is obtained

8) Once COI is obtained, Bank account need to be opened

9) Then share subscription money is brought in bank account

10) Reserve Bank of India, Indian apex Bank for regulating foreign exchange need to be intimated about receipt of FDI from foreign company/foreign citizen

Time taken in entire process-

Approx. 3-4 weeks

Documents required

1) KYC Documents of Directors and shareholders- Passport, utility bills, Bank statements, ID proofs

2) Indian address proof of business premises

3) Photos of Directors

4) Mobile and email ids of Directors

5) Certificate of registration of parent company

All documents of foreign director/ foreign shareholder need to be notarized and apostiled in home country. Further, if documents are not in English, English translation also need to be notarized and apostiled.